A QUESTION OF TAXES

I have to admit that half of the things on this blog that seem like stuff I thought of, 'cause i'm such a forward thinker'....

are really just the result of yet another email from my mom starting with the phrase, "I'm sure you've thought of this already but..."

She's like an oracle with a new england accent.

It's a buzz kill sometimes but...

it also saves my ass.

But the REALLY great part about having a mom that's paranoid is that not only do you see trouble coming around every corner...but you've already drawn a battle plan, assembled the troops, and are already sipping victory coffee in your tent. Yes, they serve coffee in my victory tent. So what.

Anyway, more often than not I tend to put out fires before they begin.

Because my mom is paranoid.

And paranoid people think of everything.

Obviously i won't get into the not so great part of 'the paranoid' because...

I still want to have a place to sleep when i come home for Christmas.

And what will be left for my autobiography.

A girl has to think ahead.

I'm KIDDING MA!

I'm kiddi-....

heh haaa ha.

ha....

*sigh*

sorry.

Ok, so...

the most recent red flag my mom tossed onto the Solo CD field was regarding taxes and selling these cds.

Again.

Good call.

Never would have thought of it on my own.

Mom's left half of her brain could totally kick the left side of my brain's ass.

Since MY selling the CDs was never part of my original plan, I never considered anything like sales tax and, what it exactly was, and who exactly gets it, and why the sky is blue, and what's the funny feeling in my pants....

not to mention the inspired idea of donations (which was never in the original plan either).

I dutifully sent an email to my wonderful accountants at Trudy Durant:

Hello My Smart 'Trudy Durant' Ladies-

Donna Lynne Champlin here.

I have a question for you...I hope you don't mind.

I figure it might save us headaches come tax time.

I am making my own Solo CD and as a happy surprise, people are already pre ordering them directly from me.

I've priced them at $15 each.

$18 with shipping and handling.

I was wondering if there was any issue with 'sales tax' that I should be considering?

And this will be a 1099 sort of thing for me, yes?

Also, people are generously offering donations to cover the costs of making this CD by myself.

How does that work tax wise?

Should I be doing something special with that?

I admit to being completely naive to all of this.

I had just planned to sell them through an established online site that takes care of all those things-

but they also take a cut-

and if i can sell some on my own...

It would be more economical for me.

Can you please advise me as to sales tax and how i will claim this income on my 2009 return?

thank you so much.

i am hoping you are all well and happy.

xoxo,dl

Here is their reply:

Hi Donna,

What great news about your CD! There may be a sales tax issue. How are you selling the CD and are you shipping it out of state? You may have to collect NY sales tax. I will look into this further, but it will be after the 15th (we are swamped with the extension deadline). The income generated will be like 1099 income you received in the past except you will have to keep track of the income generated. You should keep a separate “bookkeeping” of the income/expenses related to the CD, so we can report it as its own entity at tax time. It is easier to keep it separate from the beginning than trying to separate it later on.

The donations are really gifts to you. There are no tax consequences for the recipient of a gift.

If you have any questions or want to discuss this further, please call me. In the mean time let me know how you are selling the CD and if it is being shipped out of NY so I can research the sales tax implications.

As required by United States Treasury Regulations, you should be aware that this communication is not intended to be used, and cannot be used, for the purposes of avoiding penalties under United States tax laws.

So there you have it, darlings...

lessons learned today:

1) keep a separate budget, bank account, etc for tax purposes

2) selling your on CDs will be a 1099 situation for you come tax time

3) it seems that the only real issue with tax will be if I send a CD out of NY State?

I will get back on that with you all after the 15th

4) Claudia at Trudy Durant is awesome.... even though the required tag on the end of her emails is quite scary.

4 comments:

I won't pretend to be an accountant but I am pretty sure that you won't have to pay NY sales tax unless the CDs are sold IN STATE. That would be the way the law works out here anyway. When shipping across state lines you don't pay. Curious to see what your accounting ladies get back to you with.

When I hear "Old Friends" I think of that commercial where the two couples are walking in the park, one old and one young, and the young couple passes the old couple, and the young lady looks back at the old couple and smiles and then the camera goes to the diamond ring that the commercial is supposed to be selling.That might not help... but that's the first thing that comes to my mind :)Can't wait for the CD